Labor Supply, Risk Aversion, and Conflict Uncertainty

We argue that the presence of conflict uncertainty fundamentally re-frames the labor-leisure choice for individual agents. During normal times, supplying labor is often perceived as a safe choice. When working itself becomes perceived as a gamble due to conflict risk, an aversion to that specific risk will result in a measurable decrease in labor supply. Using proximity to the Ukrainian border as a plausibly exogenous proxy for conflict uncertainty vis-à-vis the Russian incursion into Ukraine in 2014, we show that an increase in conflict uncertainty negatively affects individuals' willingness to work. Moreover, this response also coincides with increased perceived risk aversion arising from the conflict.